KCS to stockholders: Be prepared

Written by
William C. Vantuono, Editor-in-Chief

Legislation introduced in late 2013 in Mexico’s House of Deputies to amend certain provisions in the Mexican Regulatory Railroad Service Law could have “a material adverse effect” on Kansas City Southern’s consolidated financial statements if the proposed amendments “are ultimately adopted as introduced,” KSC warns its investors in the company’s 2013 Annual Report.

The Mexican legislation would give third-party companies access to the country’s existing rail networks, which were privatized in the late 1990s. The largest are Kansas City Southern de México and Ferromex (majority-owned by Grupo México and in which Union Pacific has a 26% stake). These two railroads combined move about 90% of Mexico’s rail traffic; KCS derives about 50% of its North American revenues from KCSM operations. The legislation is currently with the Mexican Senate for further discussion and a vote. Unlike Mexico’s current railway concession structure, the proposed legislation states that new concessions will be granted only to private companies that develop new infrastructure.